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Copy of Chap004 1.doc
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Copy of Chap004 1.doc-Chapter 04 - Adjustments, Fi...
Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
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Copy_of_Chap004_1.doc-Chapter 04 - Adjustments, Financial Statements,
Page 8
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
M4–5.
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
NE
–250
+250
+250
NE
+250
b.
–3,000
NE
–3,000
NE
+3,000
–3,000
c.
–1,050
NE
–1,050
NE
+1,050
–1,050
M4–6.
(a)
1.
Utilities Expense is incurred.
2.
Cash will be paid in the future for utilities used in the current period – an
accrued expense needs to be recorded.
3.
Amount: $380 given
Adjusting entry –
Utilities expense (+E,
SE)
............................
380
Utilities payable (+L)
..............................
380
(b)
1.
Interest revenue is now earned on the note receivable.
2.
Cash for the interest will be received in the future – an accrued revenue
needs to be recorded.
3.
Amount:
$5,000 principal x .14 annual rate x 4/12 of a year = $233
Adjusting entry –
Interest receivable (+A)
.................................
233
Interest revenue (+R, +SE)
....................
233
(c)
1.
Wages expense was incurred in the period.
2.
Cash will be paid in the future to the employees who worked in the current
period – an accrued expense needs to be recorded.
3.
Amount:
10 employees x 4 days x $150 per day = $6,000
Adjusting entry –
Wages expense (+E,
SE)
.............................
6,000
Wages payable (+L)
...............................
6,000
4-8
Page 9
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
M4–7.
Balance Sheet
Income Statement
Transaction
Assets
Liabilities
Stockholders’
Equity
Revenues
Expenses
Net
Income
a.
NE
+380
–380
NE
+380
–380
b.
+233
NE
+233
+233
NE
+233
c.
NE
+6,000
–6,000
NE
+6,000
–6,000
M4–8.
ROMNEY’S MARKETING COMPANY
Income Statement
For the Year Ended December 31, 2012
Operating Revenues:
Sales revenue
Total operating revenues
Operating Expenses:
Wages expense
Depreciation expense
Utilities expense
Insurance expense
Rent expense
Total operating expenses
Operating Income
Other Items:
Interest revenue
Rent revenue
Pretax Income
Income tax expense
$
37,650
37,650
19,000
1,800
320
700
9,000
30,820
6,830
100
750
7,680
2,700
Net Income
$
4,980
Earnings per share*
$9.05
* calculated as $4,980
[(300 + 800)
2] = $4,980
550 = $9.05
Average number of shares
4-9
Page 10
Chapter 04 - Adjustments, Financial Statements, and the Quality of Earnings
M4–9.
ROMNEY’S MARKETING COMPANY
Statement of Stockholders’ Equity
For the Year Ended December 31, 2012
Contributed
Capital
Retained
Earnings
Total
Stockholders’
Equity
Balance, January 1, 2012
$
700
$
2,000*
$
2,700
Share issuance
3,000
3,000
Net income
4,980
4,980
Dividends declared
(0)
(0)
Balance, December 31, 2012
$
3,700
$
6,980
$ 10,680
* From the trial balance.
Work backwards
4-10
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